1995-VIL-193-ITAT-BLR

Equivalent Citation: ITD 055, 263,

Income Tax Appellate Tribunal BANGALORE

Date: 19.05.1995

ASSISTANT COMMISSIONER OF INCOME-TAX.

Vs

MYSORE EXPORTS LIMITED.

BENCH

Member(s)  : A. V. BALASUBRAMANYAM., S. BANDYOPADHYAY.

JUDGMENT

Per Bandyopadhyay, AM.--- Although he hearing notice was served by registered post, there was no compliance by the assessee. Hence, the appeal is being disposed of ex parte on the basis of the merits of the case and as per the records.

2. The only issue in this appeal, allowed by the first appellate authority is whether the provisions of section 72 relating to setting off of losses of earlier years will have to be given effect to first. In the assessment order, the Assessing Officer had set off the loss brought forward from earlier years against current year's income which is solely of the nature of export profits and thereafter allowed deduction under section 80HHC on the entire income. In the first appeal, however, the CIT (Appeals) directed that the deduction under section 80HHC be allowed first and thereafter only the provisions relating to adjustment and set off of earlier years' losses will have to be applied.

3. When we look to the provisions of section 80HHC (as they existed at the relevant time), we find that the said section speaks of " allowance in computing the total income of the assessee, a deduction equal to the aggregate of : ---

(a) four per cent of the net foreign exchange realisation ; and

(b) fifty per cent of so much of the profits derived by the assessee from the export of such goods or merchandise as exceeds the amount referred to in clause (a) :

Provided that the deduction under this sub-section shall not exceed the profits derived by the assessee from the export of such goods or merchandise "

There is, therefore, no doubt about the fact that so far as this particular section is concerned, there is no restrictive clause on the amount of deduction to be allowed excepting what is mentioned in the proviso about the amount of deduction not exceeding the total export profit.

4. However, the provisions of section 80A which is the main controlling section with regard to allowance of deduction under Chapter VIA, is required to be considered in this connection. The said section reads as below :

" (1) In computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in sections 80C to 80U ;

(2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee."

Gross total income is defined in sub-section (5) of section 80B as follows :

" 'gross total income'means the total income computed in accordance with the provisions of this Act before making any deduction under this Chapter or under section 280-O."

It would thus be evident that the expression "gross total income" as used in this Chapter is required to be computed after setting off brought forward losses from the earlier years. In accordance with the provisions of sub-section (2) of section 80A again, as mentioned above, the aggregate amount of deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee, "Gross total income" in the instant case being the resultant amount, after setting off the brought forward losses, in our view, the total amount of deduction allowable cannot exceed that amount. However, the total amount of deduction to be allowed in the instant case is only 50% of the total export profits which means in this case the total business profits for the year alone. If the gross total income computed by deducting the brought forward losses of earlier years from the total amount of business profits for the year exceeds the amount of 50% of the total profits for the year, there shall be no requirement for modifying the assessment order after giving effect to the first appellate order, as subsisting at present. However, if the amount of "gross total income" comes below 50% of the total export profits, then the amount of deduction allowable under section 80HHC shall have to be restricted to the amount of gross total income as above. The Assessing Officer is, therefore, being directed first to compute the amount of "gross total income" and thereafter to limit the amount of deduction under section 80HHC calculable with reference to the total amount of export profits, to this amount of gross total income only.

5. The departmental appeal may be considered to be partially allowed to the abovementioned extent

 

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